The Reserve Bank of India’s decision to keep the repo rate at 5.5% was expected. This choice aligns with market predictions and shows a careful approach to monetary policy amid various economic challenges. Markets are feeling the pressure from global factors like inflation in the Eurozone and economic data from the US. It’s important to note that trading foreign exchange (forex) carries significant risks.

Impact Of US Government Shutdown

The US government shutdown is affecting currency pairs, including EUR/USD and GBP/USD. Meanwhile, the gold market continues to reach record highs due to rising geopolitical tensions. Investors should do their homework and assess their risk tolerance before trading in forex. While FXStreet offers market insights, they are not responsible for any losses that might occur from using their information. This content is meant for informational purposes only and is not investment advice. Readers should be aware of the risks involved in trading and seek guidance if they’re unsure about their financial choices. The Reserve Bank of India’s steady repo rate of 5.5% is a relief, removing a significant uncertainty from the market. India’s core inflation rate was 4.8% in August 2025, suggesting stability in local policies for the time being. Therefore, we should focus more on global factors, as short-term volatility in Indian assets will likely come from international developments. The US government shutdown is the main factor impacting all markets, leading to weakness in the US Dollar. The Dollar Index (DXY) has dropped below the important 100.00 level for the first time this year, confirming a bearish trend. This opens the door for shorting the dollar against major currencies in the weeks to come.

Profitable Trading Strategies

Due to the dollar’s weakness, we should explore strategies to benefit from a rising EUR/USD and GBP/USD. Historically, during extended government shutdowns like the one in 2013 that lasted 16 days, the dollar remained weak until a political solution was found. Buying call options on the Euro and Pound may provide a controlled-risk way to take advantage of this trend. Gold is currently a strong safe haven, with prices heading toward $3,900 because of the shutdown and ongoing geopolitical issues. Central banks have also been active, purchasing over 800 tonnes of gold so far in 2025, which supports prices. A bullish outlook is warranted, and we can use futures or options to benefit from further price increases. As uncertainty grows around upcoming US data, like the ADP employment figures, volatility in the market is likely to rise as long as the shutdown continues. It may be wise to hedge our currency and commodity trades by buying VIX call options to safeguard against sudden market shocks. Create your live VT Markets account and start trading now.

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